Correlation Between Emerson Radio and Lululemon Athletica

Can any of the company-specific risk be diversified away by investing in both Emerson Radio and Lululemon Athletica at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Emerson Radio and Lululemon Athletica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emerson Radio and Lululemon Athletica, you can compare the effects of market volatilities on Emerson Radio and Lululemon Athletica and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Emerson Radio with a short position of Lululemon Athletica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and Lululemon Athletica.

Diversification Opportunities for Emerson Radio and Lululemon Athletica

-0.65

Correlation Coefficient

Emerson Radio  Lululemon Athletica

Excellent diversification

The 3 months correlation between Emerson and Lululemon is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and Emerson Radio is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Emerson Radio are associated (or correlated) with Lululemon Athletica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lululemon Athletica has no effect on the direction of Emerson Radio i.e., Emerson Radio and Lululemon Athletica go up and down completely randomly.

Pair Corralation between Emerson Radio and Lululemon Athletica

Considering the 90-day investment horizon Emerson Radio is expected to generate 44.76 times less return on investment than Lululemon Athletica. In addition to that, Emerson Radio is 1.41 times more volatile than Lululemon Athletica. It trades about 0.0 of its total potential returns per unit of risk. Lululemon Athletica is currently generating about 0.19 per unit of volatility. If you would invest  28,676  in Lululemon Athletica on October 12, 2024 and sell it today you would earn a total of  10,871  from holding Lululemon Athletica or generate 37.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Emerson Radio  vs.  Lululemon Athletica

Emerson Radio

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Emerson Radio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Emerson Radio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Lululemon Athletica

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lululemon Athletica are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Lululemon Athletica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emerson Radio and Lululemon Athletica

The main advantage of trading using opposite Emerson Radio and Lululemon Athletica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, Lululemon Athletica can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lululemon Athletica will offset losses from the drop in Lululemon Athletica's long position.

The idea behind Emerson Radio and Lululemon Athletica pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.